Time to curb the rising costs of prescription drugs

The U.S. will see the largest increase in per capita costs in pharmaceuticals among
developed markets through 2018. The CREATES Act: Ending Regulatory Abuse, Protecting
Consumers, and Ensuring Drug Price Competition would approve federal and state regulation
on costs to allow for return on investment by manufacturers but ensure affordability
for patients.

In June of this year, I testified before the Senate Judiciary Committee about the rising
costs of prescription medications and specifically about the CREATES Act: Ending Regulatory
Abuse, Protecting Consumers, and Ensuring Drug Price Competition (S. 3056), a bill
with bipartisan support. I was 1 of 6 witnesses, a group that also included representatives
of the Pharmaceutical Research and Manufacturers of America (PhRMA), generic drug
manufacturers, and health plans. ACP was the only medical organization asked to give
testimony at the hearing.

I brought the perspective of an internist and of my patients. As an example, I cited
a 67-year-old patient with diabetes, hypertension, and heart disease who can no longer
afford his medications, as he has fallen into the “doughnut hole” of
drug coverage and has no generic alternatives to brand-name drugs.

As another example, I cited a 40-year-old woman with asthma who cannot afford her
preventive and rescue inhalers due to their high cost and her high-deductible plan.
I pointed out that lack of adherence will lead to asthma exacerbations and potential
emergency department visits and admissions to the hospital.

I also mentioned a third patient with rheumatoid arthritis who cannot afford immune-modulating
medications, considered the standard of care, because of lack of generic low-cost
alternatives. Poor control of her disease will lead to more problems such as joint
replacement surgery and medical complications.

The last example I gave involved patients with type 1 diabetes who have no generic
insulin options. I emphasized that these are examples from 1 day in the office, and
these experiences are repeated thousands of times around the country for internists
and our patients.

The CREATES Act seeks to provide injunctive relief to generic drug manufacturers for
instances of abuse by brand-name drug companies in not sharing drug samples and safety
protocols required for FDA approval before bringing a drug to market. This is one
of several tactics used by brand-name manufacturers to squelch competition.

Other methods include “product hopping,” which extends patent life with
slight alterations in dosing schedule, a new indication, or a new route of administration
or delivery device, and “pay for delay” or “reverse payment settlement,”
which allows brand-name companies to pay generic manufacturers to keep drugs off the
market. Another strategy is “evergreening,” which extends patent life
with slight modifications in molecular structure but no appreciable change in efficacy
or safety.

We know that prescription drug costs are rising rapidly. According to data from CMS
and from the IMS Institute for Healthcare Informatics, in 2013, prescription drug
costs accounted for 9.3% of total health care spending in the U.S., with a growth
of 2.4% over the previous year to $263 billion. In 2014, spending grew by 12.2% to
$297 billion. The reasons for high drug costs are multifactorial. They include lack
of price transparency, regulatory barriers, a shortage of comparative data on cost-effectiveness
and value of drugs, health plan benefit structure, high profit margins, and loopholes
as mentioned above.

The pharmaceutical industry argues that research and development costs, regulatory
requirements, and the costs of “failed” drugs that never make it to
market or are discontinued shortly after marketing contribute to high prices. It also
argues that by improving quality of life for millions of patients and preventing diseases,
new drug development has controlled other health care costs.

What the industry fails to point out is that much of research and development is conducted
in academic institutions and that drug manufacturers receive public funding for some
of their research. Rules and regulations are important and are needed to protect patient
safety. In addition, according to Kantar Media, U.S. spending on direct-to-consumer
advertising has grown 30% in the past 2 years to $4.5 billion per year, which is more
than is spent on research and development.

The larger context of the cost of drugs or any health care expenditure is the free-enterprise
nature of our economy. Drug manufacturers account for approximately 14% of health
care costs and contribute to the nearly 20% of the gross domestic product (GDP) that
is the health care industrial complex. In this setting, the pharmaceutical industry
will try to maximize profit for its shareholders. Outliers such as Turing Pharmaceuticals,
which recently increased the price of the antiparasitic drug pyrimethamine (Daraprim)
from $13.50 to $750 a pill, highlight extremes of the for-profit pharmaceutical industry.

The benefit of drugs in maintaining, preventing, and curing disease is a major advance
in the practice of medicine. The aging population will mean more patients on multiple
medications (a study published in Mayo Clinic Proceedings in July 2013 found that 70% of patients take at least 1 prescription medication),
more brand-name drugs, more specialty drugs for the treatment of cancer or hepatitis
C, more drugs for diabetes and heart disease, and more genetically tailored drug therapy.
Therefore, it is imperative that we address the rising costs of drugs.

The College has taken a proactive position with a recent policy paper, “Stemming
the Escalating Cost of Prescription Drugs,” which was published online by Annals of Internal Medicine on March 29. These are some of the recommendations:

ACP supports transparency in the pricing, cost, and comparative value of all pharmaceutical
products. Pharmaceutical companies should disclose actual material and production
costs to regulators and research and development costs contributing to a drug's pricing,
including those drugs that were previously licensed by another company. Rigorous price
transparency standards should be instituted for drugs developed from taxpayer-funded
basic research.

ACP supports greater flexibility by Medicare and other publicly funded health programs
to negotiate volume discounts on prescription drug prices and pursue prescription
drug bulk purchasing agreements. It also supports consideration of legislative or
regulatory measures to develop a process to reimport certain drugs manufactured in
the United States, provided that the safety of the source of the reimported drug can
be reasonably assured by regulators, and establishment of policies or programs that
may increase competition for brand-name and generic sole-source drugs.

ACP opposes extending market or data exclusivity periods beyond the current exclusivities
granted to small-molecule, generic, orphan, and biologic drugs. ACP supports robust
oversight and enforcement of restrictions on product-hopping, evergreening, and pay-for-delay
practices as a way to increase marketability and availability of competitor products.

ACP believes payers that use tiered or restrictive formularies must ensure that patient
cost-sharing for specialty drugs is not set at a level that imposes a substantial
economic barrier to enrollees obtaining needed medications, especially for enrollees
with lower incomes.

The escalating costs of medications need to be addressed, and doing so will require
a coordinated effort by all stakeholders, including the pharmaceutical industry, pharmacy
benefit managers, health plans, the federal and state government, physicians, and
patients. The effort needs to focus on transparency, value, patient affordability,
and a reasonable return on investment to promote innovation.

ACP's position paper cites data showing that the U.S. will see the largest increase
in per capita costs in pharmaceuticals among developed markets through 2018. Federal
and state regulation on costs will be needed to allow for return on investment in
our free-market system but ensure affordability for our society.

Internal medicine physicians are specialists who apply scientific knowledge and clinical expertise to the diagnosis, treatment, and compassionate care of adults across the spectrum from health to complex illness. ACP Internist provides news and information for internists about the practice of medicine and reports on the policies, products and activities of ACP. All published material, which is covered by copyright, represents the views of the contributor and does not reflect the opinion of the American College of Physicians or any other institution unless clearly stated.